AMERICANS WIN ECONOMICS NOBEL

Americans continued their domination of the Nobel Prize for economics today when Robert Merton of Harvard and Myron Scholes of Stanford won the award. Merton and Scholes were honored for developing the formula that laid the foundation for massive growth of markets in financial derivatives in the past decade. The Royal Swedish Academy of Sciences says their work led to new types of investments and more efficient risk management. Merton, Scholes, and the late Fischer Black developed a method for correctly pricing derivatives. Black died of throat cancer in 1995.

CPAs are familiar of the work as expressed in the Black/Scholes model that is used for valuing stock options under the requirements of SFAS No. 123. A Lotus 1-2-3 template for valuing stock options is available in the downloads section of www.cpaj.com *